Budget implications for you

Chancellor George Osborne announces his summer budget. Photo: PA EMN-150928-134545001
Chancellor George Osborne announces his summer budget. Photo: PA EMN-150928-134545001

In this week’s Banter we are looking at the announcements in The Budget 2016 and how they will affect you.

The personal allowance will be increased from £11,000 in 2016/17 to £11,500 in 2017/18. This is the basic tax free level of earnings that most of us can benefit from.

The higher rate threshold will increase from £32,000 in 2016/17 to £33,500 in 2017/18. Individuals entitled to a full personal allowance will not be liable to higher rate tax until their total income exceeds £43,000 in 2016/17 and £45,000 in 2017/18. The higher rate of tax on salaries and pensions is remaining at 40%.

The government will introduce a new £1,000 allowance for property income and a new £1,000 allowance for trading income from April 2017. Individuals with less than £1,000 of either source of income will no longer need to declare or pay tax on that income.

Examples of this would be small trade online and renting out driveways.

If you have income below this level there is no need to report. However, if your income is above this level you can choose to deduct their expenses in the usual manner or simply deduct the £1,000 allowance. Last year an announcement was made about restriction of finance costs for landlords of residential property.

This comes into effect from April 6, 2017.

Also announced last year was that the wear and tear allowance is being abolished from April 2016. Landlords will be able to deduct the actual costs of replacing furnishings.

The existing dividend tax credit is being abolished from April 2016 and a new dividend allowance of £5,000 a year is being introduced.

Tax on dividend income above the allowance will be charged at: 7.5% for basic rate taxpayers; 32.5% for higher rate taxpayers ; 38.1% for additional rate taxpayers.

A personal savings allowance is being introduced from April 6 to remove tax from up to £1,000 of savings income from a basic rate taxpayer and up to £500 for higher rate taxpayers. Additional rate taxpayers will receive no allowance.

A new lifetime ISA will be available for adults under the age of 40 from April 2017. Individuals will be able to contribute up to £4,000 per annum and will receive a 25% state bonus.

Funds, including the bonus, can be used to purchase a first home at any time after the first annual anniversary of opening the account. Funds may be withdrawn from the age of 60.

The overall annual ISA subscription limit will increase from £15,240 to £20,000 from April 6, 2017.

This is a brief outline of some of the changes affecting most of us, if there is anything you feel may affect you mentioned above and you wish to discuss it further, please contact a member of the team.